The recent drastic rise in prices of natural gas have fueled a rise in electricity prices and inflation, plunging Europe into an energy crisis and underlining the need for energy transformation.
Energy transformation and upgrading is a fundamental solution to ensure secure supply of traditional energy and a key measure to shape the competitiveness of low-carbon economy in the future. Given that Europe is relatively short of fossil energy and relies heavily on imports of natural gas, oil and coal, accelerating the development of localized renewable energy will not only help cope with climate change, but also reduce its dependence on fossil fuels.
Reportedly, Europe is trying to promote the construction of a long-term electricity contract market in the hope of reducing the risk premium of capital cost through a long-term revenue plan, stimulating the accelerated development of renewable energy and reducing the cost of low-carbon energy transformation. The current energy crisis reflects the arduous challenges facing Europe's energy transformation and upgrading. There are some other factors too.
Because of the impact of COVID-19 on the economy, some countries have introduced a series of economic stimulus policies, leading to a rapid rebound in energy demand in 2021. Under the "Green New Deal", European companies have developed more radical transformation strategies, further reducing local energy supplies.
Also, the impact of extreme weather is becoming more pronounced. A long period of calm weather in 2021 has significantly reduced wind power output in many European countries, further exacerbating natural gas consumption. Europe has also cut its carbon quotas, pushing up carbon prices and then gas prices.
The implications of the European energy crisis deserve attention. In the face of a changing and uncertain future, better integration of energy transformation and security must be given top priority. Energy transformation is a long-term and gradual process, and the low-carbon energy transformation cannot be achieved overnight. The European energy crisis also exposes the weakness of its energy system, sounding an alarm for energy transformation. It is necessary to promote low-carbon energy transformation, otherwise its goal of a green economic recovery will become a mirage.
Governments, too, must play their role to ensure energy security and build a modern energy market system. It is particularly important for the government to strengthen risk identification and control, and properly handle the relationship between carbon reduction and energy security, the security of industrial and supply chains, food security and people's normal lives.